In Part II of this newsletter, we continue our review of significant developments, cases, and verdicts in 2020.
Misappropriation
Inevitable Disclosure
Illinois
The State of Illinois follows the “inevitable disclosure” doctrine under the Illinois Trade Secrets Act and in analyzing misappropriation of trade secrets claims under the Defend Trade Secrets Act. Under the doctrine, a plaintiff can pursue a claim for misappropriation or enjoin it by establishing that the defendant “could not operate or function” in her new position without relying on the trade secrets.
In Packaging Corp., the district court granted a motion to dismiss the misappropriation of trade secrets claims because the complaint did not sufficiently allege facts that made it plausible to infer the defendant disclosed plaintiff’s trade secrets. Mere allegations that it is possible plaintiff disclosed trade secrets is insufficient. Plaintiff’s complaint must allege facts sufficient to show intent or a high probability that the employee will use trade secrets. Mere allegations that the employee possessed trade secrets and even admitted soliciting plaintiff’s clients are not enough. Packaging Corporation of America, Inc. v. Croner (N.D. Il, 2020)
California
California, on the other hand, rejects the inevitable disclosure doctrine as inconsistent with the state’s public policy favoring mobility and free competition. Plaintiff Hooked Media was a startup company that engaged in discussions with Apple for acquisition. Apple ultimately passed but sometime after, three of its most important employees left to join Apple. Plaintiff sued for misappropriation of trade secrets, among other claims.
Hooked claimed that Apple and the former employees misappropriated algorithms, app recommendation strategies, and other technical information, on the one hand, and information about the makeup and skills of its core engineering team, on the other. As to the first, the Court of Appeal concluded that mere possession of trade secrets is insufficient to state a claim. Likewise, expert testimony about the similarity of the recommendations system Apple developed with the former employees was insufficient to raise an inference of misappropriation – rather, the engineers merely drew on the knowledge and skills they gained during their employment with Plaintiff, which the policy favoring mobility permits. California rejects the inevitable disclosure doctrine because it enacts an after-the-fact non-compete agreement. Hooked Media Group, Inc. v. Apple Inc. (2020)
If you have any questions about this Newsletter or would like to join as a contributor, please contact Dave Shenian, dshenian@clarkhill.com, 213-417-5102.